Ofgem set to launch full investigation into energy companies that could lead to break-up of the Big Six

Ofgem is expected to announce a full-scale probe into the energy market next week, it was reported today, in a move that could lead to the break-up of the Big Six companies.

The energy regulator is set to ask the Competition Market Authority (CMA) to begin the investigation into whether the big energy suppliers are ripping off customers, amid public anger over rising bills and poor customer service.

The 18-month long investigation would be the biggest-ever undertaken and could lead to the separation of the companies’ energy generation arms from their divisions selling gas and electricity to customers, The Guardian's Terry Macalister reported.

Probe: The 18-month long investigation will look into whether energy companies are overcharging customers

Ofgem announced its intention to refer the market to the competition watchdog in March.

It came after energy prices were put at the centre of the political stage following promises by Labour leader Ed Miliband to freeze bills and restructure the market if the party wins next year’s General Election.

Ofgem said in March that the Big Six energy companies - which include Centrica, SSE, E.ON, npower, RWE and EDF and control 95 per cent of the gas and electricity market in the UK - had seen their profits quadruple from £233million in 2009 to £1.1billion in 2012.

It also said it had found evidence of ‘possible tacit co-ordination’ between companies on the timing and size of price announcements but stopped short of accusing them of explicitly colluding in an illegal cartel arrangement.

Shadow energy and climate change secretary Caroline Flint told The Guardian: 'Just in the last week we've learnt that wholesale prices have fallen substantially this year and yet consumers have seen no reduction to their bills,' she said.

'This investigation must address problems like this and stop them happening again in the future.

‘However, it shouldn't paralyse politicians from taking action now to improve the lack of competition and weak regulation in the energy market, which has resulted in customers getting a poor deal.’

The news came after Ofgem told npower earlier this week that it had just three months to sort out its billing problems or it will be forced to stop all telephone sales to new customers.

Ofgem issued npower with the ultimatum after it was revealed the energy supplier received the highest number of complaints by far in the first quarter of this year.

Npower now has until the end of August to cut the number of households affected by late billing from the current level of 400,000 to 100,000.

Ofgem has also started an investigation into Npower’s ‘prolonged customer service failings’ and warned it could face a fine or compensation bill if it is found to have broken the rules.

Research by consumer watchdog Which? found that as many as 1.7million complaints were made in the three months to March – up from 1.48million in the same period last year.

The watchdog said the complaints showed millions of customers are being let down by poor service.